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HomeMy WebLinkAboutItem 02 Discuss Subdivision Application Fee Comparison AGENDA ITEM SUMMARY Meeting Date: 4/6/2015 Meeting Type: Work Session Staff Contact/Dept.: Jim Donovan, DPW Matthew Ruettgers, DPW Staff Phone No: 726-3660 Estimated Time: 20 Minutes S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Provide Financially Responsible and Innovative Government Services ITEM TITLE: DISCUSS SUBDIVISION APPLICATION FEE COMPARISON ACTION REQUESTED: Discuss development review fees, in particular as they relate to Subdivisions and how the process/fees compare to the City of Eugene in terms of cost and timing of fees. ISSUE STATEMENT: During a recent subdivision project the developer asked for a comparison and discussion of Springfield’s application fees and process as compared to the same application in Eugene. In response to the developer inquiry staff has reviewed both processes and fees to compare the respective benefits associated with each model. Staff shared this discussion with City Council in a June 19, 2014 Communication Packet Memorandum. This work session is to address questions raised by Council concerning the timing of fees in the Springfield model and whether the collection point for some upfront fees could be deferred to a point later in the process. ATTACHMENTS: 1. Council Briefing Memorandum 2. Springfield Subdivision process flowchart 3. Eugene Subdivision process flowchart 4. Springfield Subdivision process flowchart – 7 Lot DISCUSSION/ FINANCIAL IMPACT: The subdivision processes in Springfield and Eugene are essentially identical with nearly all the same steps/milestones starting at Tentative Plan all the way through Final Plat. The primary difference in each city’s approach to working with developers is the timing for the review of engineered improvements. The majority of the detailed review in the Eugene process occurs late in the process at the time of the Public Improvement Plan (PIP) application and building permits; while in the Springfield process much of this detailed review occurs early in the process during the Tentative Plan Application. The timing of these reviews also determines when the fees for the service are charged. Both approaches have competitive advantages for the developers in specific areas of the residential market. Staff will discuss both Springfield’s and Eugene’s systems as well benefits/risks of shifting the timing for collection of fees in the current Springfield system. M E M O R A N D U M City of Springfield Date: 3/30/2015 To: Gino Grimaldi COUNCIL From: Anette Spickard, DPW Director Jim Donovan, DPW Planning Supervisor Matthew Ruettgers, DPW Building & Land Development Manager BRIEFING Subject: Discussion of Subdivision Application Fee Comparison MEMORANDUM ISSUE: During a recent subdivision project the developer asked for a comparison and discussion of Springfield’s application fees and process as compared to the same application in Eugene. In response to the developer inquiry staff has reviewed both processes and fees to compare the respective benefits associated with each model. Staff shared this discussion with City Council in a June 19, 2014 Communication Packet Memorandum. This memo addresses questions raised by Council concerning the timing of fees in the Springfield model and whether the collection point for some upfront fees could be deferred to a point later in the process. COUNCIL GOAL: Provide Financially Responsible and Innovative Government Services The City of Springfield provides financially responsible and innovative government services when we respond to developer needs in a cost efficient manner that equitably recovers costs to the public. BACKGROUND: The fee comparison discussion, which was initiated by a question from a recent subdivision developer, has been discussed with the developer and also with the Development Advisory Committee (DAC) in detail. Staff presented the developer the differences in the City of Springfield’s and City of Eugene’s approach and the timing of fees, as represented on Attachments 2 and 3. The overall consensus was an understanding that both processes have pros and cons, but in the end, achieve the same outcome with nearly the same costs, while Springfield achieved a lower appeal rate saving developers time and additional costs for the appeal process. Once explained, the developer continued on with the proposed subdivision and is currently approved to begin construction. As noted in the previous CPM dated June 19, 2014, the subdivision processes in Springfield and Eugene are essentially identical with nearly all the same steps/milestones including Tentative Plan Approval, design and construction of privately engineered public improvements (PIP) and approval of a Final Plat. The primary difference in the processes is the timing for the submittal and review of engineered improvements and when the cost of preparing that detailed information is paid by the developer. Looking beyond the process comparison of the two cities, Council asked whether some of the fees could be deferred to a point later in the approval process and whether this alternative would increase our competitive position in the regional market. This memo examines the relative benefits and risks of deferring fees currently charged early in the process in Springfield (tentative plan submittal) to points later in the process such as PIP, Plat or Building Permit approvals. MEMORANDUM 4/1/2015 Page 2 Costs and Benefits of Current Process It should be noted initially that the upfront fees noted on the attached Springfield diagram (Attachment 2) are for multi-disciplinary staff review time invested in the early tentative plan stage that streamlines procedures later in the process. The fees are collected for reviews conducted by staff when the work is performed in the process. The team approach of reviewing and giving feedback on design information is a benefit to the developer, public and staff because it provides more certainty to the developer about project requirements, reduces the occurrence of appeals in the land use process and lowers overall internal costs by reducing review times needed at the PIP, Plat and Building Permit stages. The costs to the developer occur from the preparation of more detailed engineering designs at the Tentative Plan Review stage, however they benefit from the streamlined procedures later in the process which increases the marketable value of their property due to faster turnaround times, increased approval certainty and lower costs for the subsequent PIP, Final Plat and Building Permit reviews. Regardless of whether they are a “flipper” or a “turn key” builder, the value added early in the process is quantifiable and transferrable. Benefits and Risks of Deferring Fees (See Attachments 2 & 3) Relative Costs of Service: The following discussion relies upon an example using a 78 lot subdivision in the City of Springfield. The fee comparison generally concludes that the respective processes and fees are similar in basic steps and costs. Timing in Springfield benefits significantly from fewer appeals and faster PIP reviews; the full costs in Eugene for these steps are an unknown because of the external costs incurred for attorney fees and other non-city expenses. The breakout below demonstrates the relative costs of each step for each process. Springfield Process: • Tentative Subdivision is approximately 45% of overall costs • PIP is approximately 15% • Final Plat 30% • Building Permit planning fees 10%. Eugene Process: • Tentative Subdivision is approximately 10% of overall costs • PIP is approximately 35% • Final Plat 5% • Building Permit planning fees 50%. Benefits and Risks of Deferrals: The concept of deferring some of the initial fees to a point later in the process would create different benefits and risks for both the city and the developer, including some or all of the following: Benefit 1. The primary benefit to the developer is that a deferral of application fees, delays costs initially, allowing the speculative developer to restructure financing, potentially lowering interest costs, and then sell to the next developer or builder at a profit. There is marginal benefit to the developer of deferring initial fees unless the developer is allowed to secure the tentative approval and sell the project with its increased value brought forth by securing entitlements. MEMORANDUM 4/1/2015 Page 3 Risks 1. The City subsidizes the developer/development by deferring fee collection, carrying the General Fund costs for an undetermined and unpredictable amount of time. 2. It is assumed the initial development proposal completes the process to the point of fee collection. Linking collection of fees with issuance of land use decisions may impact staff’s ability to maintain compliance with the ORS 120 day timeline for land use decisions. Fewer development projects may come to completion, leaving the city to pursue collection of fees owed to cover the costs already incurred. 3. Deferrals are an additional tracking and work load item for Planning and Finance staff if financial guarantees, deferral agreements and liens are used to ensure future payment. Discussion: The next step in development of a deferral concept is to consider the questions of how much of the application fee could be deferred and for how long will the city carry the costs for the developer? In a standard review process, the fees are incurred primarily at tentative submittal and the first significant increase in value is tentative approval of the project. If initial application fees are deferred until tentative approval, the period of deferral would be approximately sixty days and the amount of application fees deferred would be proportional to the size of the development. The two subdivision development scenarios discussed below illustrate this point. Review of the two scenarios assumes no change to the review process; in both scenarios the developer must still prepare the same amount of information for submittal to experience the efficiencies realized later in the process. The benefits to the developer in both scenarios accrue primarily from the interest savings realized when financing of the project is reduced or re-structured for the two month period of the deferral. Small Subdivision Scenario (See Attachment 4): Deferrals of the approximate $8000 application fee for sixty days will realize smaller interest savings but may be a large enough amount of the overall costs to make the concept of a deferral program attractive to smaller developments of up to 10 lots, incentivizing infill development and use of the concept by smaller developers. Large Subdivision Scenario (See Attachment 2): Deferrals of larger application fees increase potential risks to the City if the proposal is not seen through to the collection point of the fees and interest savings of a percentage of overall costs may be too small to warrant use of the concept of a deferral program by the larger developers. Internally, the concept warrants a broader discussion of the potential impacts. Limited use or limiting to small subdivisions may limit impact on revenues, but requires the same internal tracking and budgeting mechanisms or financial guarantees to be created. Staff will be available at the Work Session to discuss this experience and provide more detail or answer questions related to the deferral concept or the two examples provided above. Council Options: Council may a) take no action, or b) direct staff to further explore the concept by formulating a pilot project for a trial run if indicators researched reflect a positive outcome for the City, the public and the development community. REQUESTED ACTION: Give direction to staff on whether to explore the deferral concept further. 3/2014 ATTACHMENT 2 City of Springfield TYPE II – SUBDIVISION REVIEW (Planning and Engineering) Assumptions: 13 Acres, 78 Lots TIMELINE ------------------VARIABLE--------------------ORS 120 STARTS----------------------+/-60 DAYS------------VARIABLE----------+/- 120 DAYS---------------------------VARIABLE Counter Call DIM Meeting DRC_ Notice Review Write Final PIP Plan Application PIP Approval Bonding/ Construction approval* Final Plat Approval Building Permit Site Plan Review* P.C. Appeal LUBA Appeal Prevention Note: Front loaded 75% tentative plans allow Current Development staff to actively coordinate with potential appellants during the notification period, respond to concerns and negotiate resolutions agreeable to the applicant and appellant. This process is a significant factor in a very low appeal rate of applications. Low appeal rates save all parties’ time and significant litigation costs. ($5-$50K) N o C h a r g e $ 5 2 1 . 0 0 Pre- Submittal Application $ 3 4 6 . 0 0 $ 6 3 , 3 6 4 . 7 5 Subdivision Tentative Plan Application Tentative Decision $ 1 8 , 9 0 0 Final Plat Pre-Sub. Application F.P. Application $ 3 4 6 . 0 0 $ 3 9 , 7 8 4 . 5 0 $ 1 6 , 4 5 8 . 0 0 * *For the purposes of this flow chart the costs for Development Review Construction Inspection and Building Permits have been excluded. The fees reflected are the $211 per lot planning fee for review of the building permit. T o t a l P e r m i t C o s t s f r o m T e n t a t i v e t h r o u g h B u i l d i n g P e r m i t S i t e P l a n R e v i e w , e x c l u d i n g n o t e d i t e m s $139,720.25 Ap p e a l P r e v e n t i o n PIP Process: The informal PIP review begins upon submittal of the DIM application. Development Engineering staff is heavily involved from the beginning of the project through the tentative approval to the point the majority of the design work/issues have been completed. This results in shorter review times once the Final PIP plans are submitted (typically 2 reviews). Final Plat Process: The applicant has the option at the time of PIP application have the final plat reviewed concurrently, reducing the time of approval at the time the applicant elects to construct or bond for the required PIP improvements. 3/2014 ATTACHMENT 3 City of Eugene TYPE II – SUBDIVISION REVIEW (Planning and Engineering) Assumptions: 13 Acres, 78 Lots TIMELINE ------------------VARIABLE----------------------ORS 120 STARTS -------------Variable +/- 45 Days------VARIABLE----------+/- 120 DAYS--------+/- 60 DAYS---VARIABLE Completeness Review Notice Determination of completeness / incompleteness PEPI Plan Application PEPI Approval Bonding/ Construction approval* Final Plat Approval Building Permit Site Plan Review* P.C. Appeal LUBA Appeals: It is understood this back loaded process tends to result in a higher rate for appeals at the Planning Commission and LUBA level. This is due the reduced amount of design level detail required for tentative approval. Appeals result in higher costs for the applicant and a longer approval period which is not reflected on this flow chart. In the above example an appeal would require an application fee of $4504.42 plus legal fees. Pre- Submittal Application (Optional) H o u r l y Subdivision Tentative Plan Application Director Decision $ 4 5 , 0 0 0 * H o u r l y F.P. Application $ 7 , 8 8 2 . 8 8 $ 6 0 , 0 6 0 . 0 0 * *For the purposes of this flow chart the costs for Development Review Construction Inspection and Building Permits have been excluded. The fees reflected are the $770 per lot planning fee for review of the building permit. T o t a l P e r m i t C o s t s f r o m T e n t a t i v e t h r o u g h B u i l d i n g P e r m i t S i t e P l a n R e v i e w , e x c l u d i n g n o t e d i t e m s $124,271.25* Tentative Plan and PEPI Process: The PEPI review process in this back loaded system occurs after the decision has been issued. The tentative plan review has limited engineering review resulting in a longer PEPI review process and additional comments / design changes not identified in the tentative plan review and approval. Land use appeal rates increase in response to uncertainties and confusion that may result from the scarcity of information available at the time of tentative decisions and public notice. *Fees and Schedule: The information reflected on this chart is representative of a near flawless application. It does not reflect time delays for incomplete applications, additional reviews, Adjustment Review Process or appeals. Land Use applications and PEPI reviews which require many of these additional items are completed by staff on an hourly basis, which may result in substantial increases to this overall fee. $ 9 , 0 0 8 . 8 5 T I A $ 2 , 3 1 9 . 5 2 3/2014 ATTACHMENT 4 City of Springfield TYPE II – SUBDIVISION REVIEW (Planning and Engineering) Assumptions: 1 Acres, 7 Lots TIMELINE ------------------VARIABLE--------------------ORS 120 STARTS----------------------+/-60 DAYS------------VARIABLE----------+/- 120 DAYS---------------------------VARIABLE Counter Call DIM Meeting DRC_ Notice Review Write Final PIP Plan Application PIP Approval Bonding/ Construction approval* Final Plat Approval Building Permit Site Plan Review* P.C. Appeal LUBA Appeal Prevention Note: Front loaded 75% tentative plans allow Current Development staff to actively coordinate with potential appellants during the notification period, respond to concerns and negotiate resolutions agreeable to the applicant and appellant. This process is a significant factor in a very low appeal rate of applications. Low appeal rates save all parties’ time and significant litigation costs. ($5-$50K) N o C h a r g e $ 5 2 1 . 0 0 Pre- Submittal Application $ 3 4 6 . 0 0 $ 7 , 8 5 9 . 6 5 Subdivision Tentative Plan Application Tentative Decision $ 3 , 2 0 0 Final Plat Pre-Sub. Application F.P. Application $ 3 4 6 . 0 0 $ 4 , 1 8 1 . 0 0 $ 1 , 4 7 7 . 0 0 * *For the purposes of this flow chart the costs for Development Review Construction Inspection and Building Permits have been excluded. The fees reflected are the $211 per lot planning fee for review of the building permit. T o t a l P e r m i t C o s t s f r o m T e n t a t i v e t h r o u g h B u i l d i n g P e r m i t S i t e P l a n R e v i e w , e x c l u d i n g n o t e d i t e m s $17,930.65 A p p e a l P r e v e n t i o n PIP Process: The informal PIP review begins upon submittal of the DIM application. Development Engineering staff is heavily involved from the beginning of the project through the tentative approval to the point the majority of the design work/issues have been completed. This results in shorter review times once the Final PIP plans are submitted (typically 2 reviews). Final Plat Process: The applicant has the option at the time of PIP application have the final plat reviewed concurrently, reducing the time of approval at the time the applicant elects to construct or bond for the required PIP improvements.